Saudi Arabia Joins BRICS

One likes to think that the conflict between Israel and Hamas should be contained. One likes to think that such conflicts are none of our business, and that we should just let them play themselves out.

And yet, as Iranian proxy actors attack American troops with impunity across the Middle East and as the Iran-backed Houthi rebels shut down shipping through the Suez Canal, the ostrich approach to foreign policy-- that is, the head-in-the-sand approach feels naive, on a good day. 

Living as we do in an interdependent world, we do well to try to manage international relations, certainly not to ignore them and to hope that they will fade into the mist.

Anyway, the Biden fecklessness about the Middle East, its manifest pusillanimity, has an impact. 

Consider this: Saudi Arabia has just joined the group called BRICS. This confederation of nations, designed to counter American and Western interests in the world, began with five members, Brazil, Russia, India, China and South Africa.

If such is your inclination, you can console yourself with the thought that Argentina has decided not to join BRICS.

The Wall Street Journal suggests that the BRICS nations want to deprive the American currency of its reserve status, thus making it less likely that nations will keep their reserves in dollars, as in treasury securities. Obviously, this will make it less likely that America can confiscate their assets. 

When the Biden administration decided to weaponize the currency by attacking Russian bond holdings, it set off alarms around the world. The result-- the increased importance of BRICS.

J. G. Collins explains this aspect in the Epoch Times:

According to the Financial Times, the United States and the G-7 “are actively exploring ways to seize Russian central bank assets” in their countries to fund Ukraine because political opposition to continuing Ukraine support in the United States and Europe threaten the flow of money that has kept Ukraine afloat. The paper reported it had seen a document written by the United States that said, under international law, “G7 members and other specially affected states could seize Russian sovereign assets as a countermeasure to induce Russia to end its aggression.”

Yale economist Robert Schiller has sounded the alarm. At issue is the simple fact that the dollar is the world’s reserve currency. If such ceases to be the case, the results would be cataclysmic:

….it would sow doubt among other countries that their investments in U.S. Treasurys, markets, and financial institutions could be seized by the United States in a political dispute.

In the past commerce took place in dollars. Now, countries like Saudi Arabia and Brazil are doing more business in Chinese currency.

The Wall Street Journal thinks that the Saudis are simply stupid for joining BRICS.

The Journal editorializes that the Saudis want to have constructive relations with Israel. That is, they want to join the Abraham Accords. But, to do so they will need a security guarantee from the United States, to protect them against Iran and its proxies.

But, how can this happen, the Journal continues, when the Saudis are making nice with all of America’s enemies, like the BRICS nations? Considering that security guarantees need to be enacted by Congress, does the new Saudi-BRICS alliance help or hurt their cause?

Fair point, point that would be fairer if our security guarantees were really worth something. Surely, you know that the Saudis despise the Houthis, Iranian proxies that have been shooting rockets at Saudi Arabia. And you know that the Saudis also despise Hamas, an offshoot of the Muslim Brotherhood.

And the Saudis have noted, not just American cowardice in the region, but also, the Biden administration's efforts to suck up to Iran. 

The Journal explains rightly that the Saudis want to modernize their country. It is basic to the Crown Prince’s agendae . And yet, keep in mind that the Biden administration excoriated Mohamed bin Salman for the murder of journalist Jamal Khashoggi. This did not create good will. Moreover, the Saudi development model seems more autocratic than democratic.

But then, how reliable is the United States? How sure are people that we will be able to repay loans, that is, bond holdings. Consider this, from J. G. Collins in the Epoch Times:

Within our own borders, violent protests that went unchecked after the death of George Floyd, the storming of the Capitol on Jan. 6, and the Marxist-inspired pro-Hamas protests have rattled the sense of American stability among foreigners more than at any time since the Vietnam War.

Given all that, it should not be a surprise that other countries are moving to de-dollarize their holdings. The world has growing concerns about the stability of the United States and our ability to meet our debt obligations. The Saudis, whom we have relied upon for 50 years to help maintain demand for the U.S. dollar as the world’s global reserve currency, had announced that they are joining the BRICS, the international coalition of Brazil, Russia, India, China, South Africa. Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates joined the same day.

Collins points out that during the Nixon presidency, when the status of the dollar as reserve currency was coming under attack, Treasury Secretary William Simon made a back channel deal with the Saudis, to ensure that they would transact oil sales in dollars.

If the Saudis are now bailing out of the dollar reserve system by joining BRICS, it is not good news. Threatening to confiscate people’s money does not create feelings of security.

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